NPS Withdrawal Rules Explained for 2022
TABLE OF CONTENTS
An introduction on NPS withdrawals
NPS investment is one of the ideal investments one can make for their post-retirement income. You can open an NPS account based on your preference and needs. There are two types of accounts under NPS, Tier 1 and Tier 2. As per your preference, eligibility, and requirements, you can choose to invest in both of these accounts.
The maturity period of the Tier 1 account is 60 years of age and from a Tier 2 account, one can withdraw money anytime. An account holder can partially or completely withdraw their money based on some conditions. To know more about it, let's understand the NPS withdrawal rules in detail.
What are NPS withdrawal rules?¹
Under different conditions of withdrawal, the withdrawal rules depend. Read the details below to know more –
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NPS rules and regulations for partial withdrawal
An account holder is allowed to make a tax-free partial withdrawal from their NPS account by submitting an application. However, NPS withdrawal rules are yet to be implemented. There are some conditions that allow the account holder to apply for cash withdrawal, like –
- You can only withdraw cash if your account is active for the last 3 years
- Not more than 25%¹ of the amount can be withdrawn
- You must have a strong reason to get cash withdrawal, like –
- Your child's marriage
- Your child's higher education
- For the purchase of a house in your or your spouse's name. However, it is only applicable if you do not have any existing home
- Medical emergencies like cancer, kidney failure, organ transplant, etc.
- If you met any serious or life-threatening accident
- Illnesses mentioned under PFRDA
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NPS withdrawal rules in case of retirement
NPS withdrawal rules for retirement are quite basic and simple to understand. You get to withdraw 60% of the amount and the rest of the 40% has to be invested in an annuity that gives you regular monthly income. In a recent NPS withdrawal rule, an account holder can withdraw 100% of the amount if it is equal to or less than ₹5 lakh. This withdrawal is also tax-free. The cash withdrawal is tax-free although the annuity you purchase is taxable under your tax slab.
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Withdrawal from NPS rules for voluntary retirement
If you have an NPS account and you wish to take voluntary retirement before the age of 60, then you can also apply for the NPS withdrawal. The rules for the same are –
- Your account must be 10 years old
- If your NPS account balance is less than or equal to ₹1 lakh, you can withdraw 100%² amount as a premature NPS withdrawal
- Under premature withdrawal, only 20% can be withdrawn and the rest of the 80% needs to be invested in an annuity¹
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NPS withdrawal rules in case of death of a subscriber
The legal nominee takes charge of the NPS account if the account holder dies during the account tenure. For private-sector employees, 100% of the amount can be withdrawn and for government employees, annuity purchase is compulsory.
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Rules for corporate sector employees & citizens on retirement
For citizens and corporate sector employees, the NPS withdrawal rules post-maturity mention that only 60% of the invested amount can be withdrawn. The rest of the 40% has to be invested in an annuity.
In case the amount is equal to or less than ₹5 lakh, 100% amount can be withdrawn.
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NPS Premature Exit Rules²
There are different rules of premature cash for Tier 2 and Tier 2 NPS accounts. These are –
- Tier 1
- If the invested amount is less than or equal to ₹1 lakh, then lump sum cash withdrawn is tax-free
- If the invested amount is more than ₹1 lakh, then only 20% of the amount can be withdrawn and is also taxable. The rest of the 80% is subject to annuity purchase.
Source:
https://npscra.nsdl.co.in/download/pdf/SOP-Online%20Exit%20Process%20for%20eNPS%20Subscribers.pdf- Tier 2
- Tier 2 accounts allow unlimited numbers of cash withdrawals. It can be done by visiting your nearest POP-SP
- Tier 1
Amount Allowed for Partial Withdrawal
Partial withdrawal of the NPS investment is permitted. However, under applicable reasons, only 25% of the amount can be withdrawn and not more than that. For instance, if Ranjan has an investment of ₹10 lakh, then under the partial withdrawal, only ₹2.5 lakh can be withdrawn.
Rules for consecutive partial withdrawal – 5 years gap rule in NPS
An NPS account holder can apply for a partial withdrawal of the cash after 3 years of the account opening. However, for partial withdrawal, there are certain rules. These are –
- You can make 3 consecutive partial withdrawals
- The gap between each withdrawal must be 5 years
- The maximum partial withdrawal can be 25% of the total invested amount
Exceptional cases in which the 5-year gap rule does not apply
- Stroke
- Multiple Sclerosis
- Cancer
- Kidney Failure (End Stage Renal Failure)
- Heart Valve Surgery
- Primary Pulmonary Arterial Hypertension
- Aorta Graft Surgery
- Major Organ Transplant
- Coronary Artery Bypass Graft
- Paralysis
- Coma
- Total blindness
- Myocardial Infarction
- Accident of serious or life-threatening nature
- Any critical illness that is life-threatening as stipulated in the guidelines, circulars or notifications issued from time to time by the Authority
NPS withdrawal forms:³
- Exit from National Pension System Due to Superannuation & Incapacitation
- Exit from National Pension System Due to Superannuation & Incapacitation in Hindi
- Exit from National Pension System Due to Premature Exit
- Exit from National Pension System Due to Premature Exit in Hindi
- Form for Withdrawal by Claimant due to Death of Subscriber
- Form for Withdrawal by Claimant due to Death of Subscriber in Hindi
- Complete Withdrawal Request Form AP
- Complete Withdrawal Request Form AS
- Form for Partial Withdrawal under NPS
- Affidavit for non-submission of PRAN Card_subscriber
- Affidavit_For non Submission of PRAN Card_claimant
- Certification of death certificate if received in Vernacular Language
- Indemnity Bond
- Relinquishment Deed
- Request for Continuation or Deferment
- Tax laws for NPS withdrawals
- Documents necessary for NPS withdrawal
Frequently Asked Questions
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What is the Time Period for NPS Withdrawal?
After 3 years of the account opening, you can only apply for the cash withdrawal.
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How to Apply Online and Offline for NPS Withdrawal?
Under the online method of cash withdrawal for Tier 2 accounts, you need to visit the e-NPS website. Fill out and submit the withdrawal form along with documents. Under the offline method, you need to visit the nearest POP-SP branch and submit the form and the required document.
For Tier 2 accounts, only the option of POP-SP can be used to withdraw the cash.
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Can I claim 100% withdrawal in case of superannuation and premature exit?
Only 20% of the cash can be withdrawn under premature exit if your balance is above ₹1 lakh. Below ₹1 lakh, lump sum amount can be withdrawn. Under superannuation, only 60% amount can be withdrawn and the rest of 40% is utilised for annuity purchases.
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What are the conditions for partial withdrawal from Tier 1 account?
You can make 3 partial withdrawals with a gap of 5 years in each withdrawal. Also, only 25% of the amount can be withdrawn.
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How do I submit a claim to withdraw the corpus?
For Tier 1 accounts, both online (eNPS) and offline methods (POP-SP) are available. For Tier 2 accounts, withdrawal claims can only be filed via POP-SP.
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How can the partial withdrawal be processed?
You need to submit a cash withdrawal form either at the online website of eNPS or POP-SP branch. After verification, the process is carried forward.
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Can I request a withdrawal from my NPS account online?
For Tier 1 account cash withdrawal, an online form can be submitted at the website of e-NPS.
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What is the tax benefit on NPS partial withdrawal?
You can withdraw 60% of the total value collected. This amount would be tax-free. The remaining 40% will be used for your annuity/ pension, which would be taxable.
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How to check the status of an NPS withdrawal request?
The following two options are available for viewing the NPS withdrawal status –
- Visit the CRA website and click on 'Limited Access View' on the home page
- Visit the eNPS website and click on 'Withdrawal Request Status View' as mentioned under the 'Exit Withdrawal Request'
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How many times can we withdraw NPS?
As per the NPS withdrawal rules, a maximum of 3 withdrawals can be made during the account tenure.
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Can I withdraw NPS before 60 years?
Yes, you can. However, you need to specify the reasons.
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How can I partially withdraw from NPS?
By visiting either the nearest POP-SP or the eNPS website, you can apply for a partial cash withdrawal.
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Can I take out a loan against NPS?
As of now, there is no rule of loan against NPS investment.
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How long does partial withdrawal take NPS?
Within 3 days, you may receive your requested amount under partial withdrawal.
Sources:
1 https://www.etmoney.com/pension/nps-withdrawal
2 https://npscra.nsdl.co.in/download/pdf/SOP-Online%20Exit%20Process%20for%20eNPS%20Subscribers.pdf
3 https://npscra.nsdl.co.in/non-goverment-form.php
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